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Higher education updates from the THE editorial team

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Inside the Department for Business, Innovation and Skills, grey matter is being strained over the vexed question of how much more to deregulate the higher education market.

The analysis, complicated enough on its own, is being made in the context of serious instability in student admissions and uncertainty about the future of public funding.

Several factors will feed into the decision on lowering the threshold at which student places are removed from the numbers cap, but most important to the Treasury is cost.

The vast majority of students with grades of AAB at A level go to university, so freeing them from number controls this year exposed the government to relatively little risk.

But the base participation rate among students getting equivalent grades in other qualifications is lower, so freeing them from controls had the potential, at least, to cost the public purse more.

This suggests that dropping the threshold to ABB or BBB will involve steadily more risk on two fronts: the base participation rate among those with A levels will be lower at these grade boundaries, and the proportion of students with A-level equivalents (who are still less likely to go into higher education at present) will rise.

The threat to the Treasury is that if all these students are freed from controls, and are offered places at more prestigious universities than at present, the number deciding to take a degree could rise to unaffordable levels.

In such a scenario, the Higher Education Funding Council for England might have to reduce the size of the core allocation of places (currently set at a minimum of 20 per cent of each institution's total) to keep overall student numbers stable.

But this could lead to further problems.

How, for example, would a selective university that moves almost entirely into the deregulated section of the market comply with the directive from Alan Milburn, the government's social mobility adviser, that it should do more to make offers at lower grades when appropriate?

And would disciplines with relatively few students with top grades survive?

Would a Russell Group university with lots of engineering undergraduates, for example, fill its places if it was limited to offering at BBB or above, with next to no "core" to dip into for lower offers?

There are an awful lot of "coulds" and "mights" in all this, but these are the sorts of assessments that officials in BIS must be grappling with.

One added "uncertainty factor" is that it is still not known exactly how this year's admissions have played out at an institutional level.

Until that is clear, it's difficult even to try to assess who the winners and losers would be, let alone to calculate the size and potential ramifications of those wins and losses under ABB or BBB.

Ultimately it will be the financial situation that dictates whether the government sticks at ABB or risks dropping lower.

Martin Williams, director of higher education policy at BIS, indicated as much at a conference in London last week.

The government's hesitancy on this huge issue, he said, is "a product of genuine uncertainty about the financial exposure in a very big change". So the wait continues.